Monday, April 25, 2011

Pharma's Most Impervious Pipeline

As a follow-up to Friday's look into some of theworst pharmaceutical pipelines, I felt it would be only prudent to offer a glance into possibly the most rock-solid pipeline in the business. I know some of you will look at this choice with disdain or perhaps place an asterisk next to the company, butTeva Pharmaceutical(Nasdaq:TEVA-News) is truly in a class of its own.

Teva Pharmaceutical is a generic-drug vulture -- waiting in the corner to feast on larger pharmaceutical companies' patent plights. The company has roughly 1,250 drugs in its pipeline and countless others waiting for FDA approval. This isn't to say that Teva doesn't bring its own drugs to market, because it has developed Copaxone for the treatment of multiple sclerosis and Azilect for Parkinson's disease. But the company's primary objective is to corner the generic-drug market worldwide, and up until now it's done just that.

Since purchasing Barr Laboratories three years ago,revenue has soared. The company reported a shade over $11 billion in revenue in 2008, and current projections call for the company to rake in more than $20 billion in sales in 2012. Although most of Teva's competition is private, Teva likely brings in more each year thanRanbaxy International,Novartis' (NYSE:NVS-News) generic-drug divisionSandoz International, andWatson Pharmaceuticals(NYSE:WPI-News)combined!

Teva is trading at less than 8 times forward earnings, which puts it in the same"cheap" territoryasEli Lilly(NYSE:LLY-News) andAstraZeneca(NYSE:AZN-News). However, as I pointed out last week, these two companies are slated to potentially lose a big chunk of their revenue stream from patent expirations over the next four years.